Wietschner v 9 Vandam JV LLC 2024 NY Slip Op 31172(U) April 5, 2024 Supreme Court, New York County Docket Number: Index No. 655573/2023 Judge: Margaret A. Chan Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

### FILED: NEW YORK COUNTY CLERK 04/05/2024 05:02 PM INDEX NO. 655573/2023 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 04/05/2024

1 of 7 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M 

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ELISA WIETSCHNER, as trustee of the WFIG Trust Plaintiff,

-v9 VANDAM JV LLC, Defendant.

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HON. MARGARET A. CHAN: INDEX NO. 655573/2023

MOTION DATE 11/08/2023

MOTION SEQ. NO. 001

DECISION+ ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 16, 17, 18, 19, 20,21,22,23
were read on this motion to/for JUDGMENT

- SUMMARY IN LIEU OF COMPLAINT

In this action, plaintiffElisa Wietschner (Elisa), as trustee ofthe WFIG Trust, moves for summaryjudgment in lieu ofcomplaint pursuant to CPLR 3213 to recover sums allegedly owed by defendant 9 Vandam 

### JVLLC on three promissory notes. Defendant opposes. For the reasons below, plaintiffs motion is denied. 

### BACKGROUND This action arises from three promissory notes that plaintiffmade to defendant in April and June 2023 in connection with a real estate project at 9 Vandam Street, New York, NY 10013 (NYSCEF # 3 - Wietschner afO. Defendantpartially owns the underlying property ofthis project through its subsidiary, 9 Vandam Borrower 2 LLC (Vandam Affiliate) (NYSCEF # 19- Wiener aff, ,i 3; NYSCEF # 21). In November 2021, Vandam Affiliate acquired the property with financing from non·party Maxim Credit Group, LLC (Maxim) (NYSCEF # 19, ,i 4; NYSCEF # 20). Specifically, Maxim made Vandam Affiliate mortgage loans of$7 million in total (NYSCEF# 21 at 1; NYSCEF# 7 at 2

- the Maxim Loans). At all relevant times, defendant, Vandam Affiliate, and other Vandam entities in this ownership structure were managed by a Manhattan-based real estate development company called the Arch Companies (Arch) (NYSCEF# 21; NYSCEF# 3, ,i 8). Arch, in turn, has been managed by non·party 608941 NJ Inc. since November 2023 (NYSCEF # 19, 

### ir,i 2, 8).1

1 In a lawsuit between the members ofArch, Hon. Joel M. Cohen ordered 608941 NJ Inc. (a/k/a Oak) to manage Arch while the case is pending (Index No. 158055/2023, JeffreySimpson vJared Chassen etal, NYSCEF # 418).

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### FILED: NEW YORK COUNTY CLERK 04/05/2024 05:02 PM INDEX NO. 655573/2023 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 04/05/2024

2 of 7 Plaintiffs husband, Howard Wieschner (Howard), is another investor in this real estate project (NYSCEF# 19, 

## ,r 6). Howard holds membership interest in defendant through WI Emoticon LLC, which entityhe controls as its sole member (NYSCEF # 21 at 8·11). Howard also has a family trust named the WFIG Trust, of whichplaintiffserves as the trustee (NYSCEF# 3, 

## ,r,r 1, 11; NYSCEF# 19, 

## ,r 7). Around April 2023, defendant approached Howard for additional financing because the project needed emergency "bridge funding" (NYSCEF # 3, 

### ,r,r 3, 9; NYSCEF# 19, 

## ,r 6). Howard agreed to provide such funding as promissory notes and not equityinvestment (NYSCEF# 19, 

## ,r 6). 

### As such, inApril and June 2023, the WFIG Trust made defendant three promissory notes totaling $1,049,089.55 (NYSCEF#s 4·6

- the Notes). The Notes were signedbyplaintiffin her capacity as trustee ofthe WFIG Trust (NYSCEF#s 4·6). The foregoing funding arrangement and ownership rights are summarized in the chartbelow.



### Terms of 

### theNotes The Subject Loan ($1 Million)

Maxim Credit Group, LLC (non-party) 

# J

The Ma.;m Loan ($7 Million)

The Notes plaintiffissued to defendant have substantially the same terms except for their principal amounts2 and maturity dates (NYSCEF#s 4-6). The Notes were all signedby Jeffrey Simpson (Simpson) from Arch as defendant's authorized signatory (NYSCEF#s 4·6). The Notes define an "Event ofDefault" to include a

2 The first note datedApril 21, 2023 has a principal amount of$349,089.55 (NYSCEF # 4). The second note datedJune 2, 2023 has a principal amount of$400,000.00 (NYSCEF # 5). The third note dated June 7, 2023 has a principal amount of$300,000.00 (NYSCEF # 6).

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### FILED: NEW YORK COUNTY CLERK 04/05/2024 05:02 PM INDEX NO. 655573/2023 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 04/05/2024

3 of 7 situation where the defendant 

### "admitsin writingitsinabilitytopay, itsdebtsas they become due" (NYSCEF #s 4·6, § 3.1 [c] [emphasis added]). The Notes also contain an acceleration clause statingthat "after [plaintiff] becomes aware ofthe occurrence ofany Event ofDefault that is continuing, [plaintiff] may accelerate this Note by written notice to [defendant], with the outstandingprincipalbalance ofthis Note becoming immediately due and payable in cash" (NYSCEF#s 4·6, § 3.2). As to maturity date, the promissory note dated April 21, 2023 provides that its entire amount outstanding are due "on the earlier of (i) April 20, 2024 or (ii) the date on which that certain loan made by [Maxim] to [Vandam Affiliate] is fully satisfied" (NYSCEF# 4, § 1). In contrast, the other two promissory notes dated June 2 and June 7, 2023, do not have an April 20, 2024 benchmark date and simply define their maturity date to be "the date on which that certain loan made by [Maxim] to [Vandam Affiliate] is fully satisfied" (NYSCEF#s 5, 6, § 1). 

### Vandam~Default UndertheMaxim Loans On September 28, 2023, Maxim sent Vandam Affiliate a notice ofdefault under the Maxim Loans, alleging thatVandam Affiliate "failed to make a timely interest payment under the [Maxim Loans] for the month ofSeptember, 2023" (NYSCEF# 7 at 3

- the Maxim Default Notice). The Maxim Default Notice was also sentto Arch, as guarantor ofthe Maxim Loans (id. at 2). Later that day, Arch emailed the Maxim Default Notice to Howard, noting: Please see attached default noticejust received onVandam. The lender has expressed their willingness to work with us and come up with a structure, but they need their interestpaid in order to continue discussions. (NYSCEF # 7 at 1). Minutes later, Howard wrote back: "Thanks · I presume byyour note that you will not be paying the interest?" (NYSCEF# 8 at 1). Simpson then responded:

(id.). As we have told you, we have overextended ourselves on this project. We cannot find more capital at this time without participation. I told you about the interestpayment before the default letter, multiple times. I took you up onyour offer to send cash to move this project along, thatwentbackwards. The staffhas been furloughed, and there is minimum coverage there for the moment since there is no money to proceed at this time. Ifthe purpose ofyour dialogue is tobe constructive, please advise. Ifit is not, we will defer to counsel.

The record contains no more email exchanges on this subject. A few days later, on October 3, 2023, plaintiffsent a default notice under each ofthe Notes to defendant, care ofArch, statinginbold capitalized letters that "[defendant] is in default ofits obligations under the note due to managingmember of [defendant]

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### FILED: NEW YORK COUNTY CLERK 04/05/2024 05:02 PM INDEX NO. 655573/2023 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 04/05/2024

4 of 7 acknowledging that [defendant] cannotpayits debts when due as further evidenced by [the Maxim Default Notice]" (NYSCEF#s 9·11 -the Default Notices; NYSCEF# 3, 

## ,r 13). The Default Notices statedthat the sums due under the Notes had become immediately due and payable (NYSCEF#s 9·11). However, plaintiffalleges that defendant has not made any payments under the Notes (NYSCEF# 3, 

## ,r 15). 

### Procedural

### History On November 8, 2023, plaintiffcommenced this action and moved for summaryjudgment in lieu ofcomplaint under CPLR 3213, seekingprincipal payments under the Notes totaling $1,049,089.55 plus interest and costs and expenses incurred in this action, includingreasonable attorneys' fees (NYSCEF#s 1, 2). Defendant opposes (NYSCEF # 22

- MOL Opp). In support ofthis motion, plaintiffalleges that defendant has defaulted on the Notes because Simpson's email on September 28, 2023, constitutes a written admission ofdefendant's inability to pay its debts, which is an event ofdefault (NYSCEF # 12- MOL at 6). Plaintiffinterprets Simpson's emailto mean that "Arch and the entities under its management and control, which includes defendant, are unable to pay their debts" (id). Plaintiffadds that such an event ofdefault has triggered the Notes' acceleration clause and causedpayments under the Notes to be due immediately (NYSCEF# 23

- Reply at 6). In opposition, defendant argues that summaryjudgment is precludedby questions offact as to whether Simpson in his email admitted that defendant-as opposed to Vandam Affiliate-could not satisfy its debts (NYSCEF# 22 at 5, 8). According to defendant, Simpson's email only concerned Vandam Affiliate's inability to pay interest under the Maxim Loans, not defendant's inability to pay under plaintiffs Notes (id at 3·4, 8). Defendant asserts that payments under the Notes are not due until the satisfaction ofthe Maxim Loans, and plaintiffshould not be able to "jump the line" and collect payments before Maxim (id at 1, 8). Defendant also contends that summaryjudgment under CPLR 3213 is inappropriate here because the alleged default is not a failure to pay, but an "non-monetary default that requires significant prooffrom extrinsic evidence" (id at 6·7). On reply, plaintiffavers Simpson's email indicated that the entire real estate project was stalled and nothingin the email limited its scope to Vandam Affiliate and the Maxim Loans (NYSCEF# 23 at 3, 6). 

### DISCUSSION CPLR 3213 permits "actions based upon an instrument for the payment of money only to be commenced with a motion for summaryjudgmentrather than a complaint" 

### (Banco Popular

### N. Am. 

### v Wctory TaxiMgt., Inc., 1 NY3d 381, 383 [2004]). To establishprima facie entitlement to summaryjudgment in lieu of complaint on a promissory note, a plaintiffmust show that the instrument sued upon contains "an unconditionalpromise to pay a sum certain

... due on demand or at a definite time" ( 

### Weissman v SinormDeli, Inc., 

### BB NY2d 437, 444 [1996]).

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5 of 7 An instrument does not qualify for CPLR 3213 treatment "ifoutside proofis needed, other than simple proofofnonpayment or a similar de minimis deviation from the face ofthe document" 

### (id; seeMaglich v Saxe, Bacon & 

### Bolan, P. 

### C, 97 AD2d 19, 21 [1st Dept 1983] ["[w]here proofoutside the instrument is necessary to establish the underlying obligation, the CPLR 3213 procedure does not apply'']). Outside evidence that canbe considered a "de minimis deviation" includes readily ascertainable interest rate ( 

### Weissman, 88 NY2d at 444), a line ofcredit statement 

### (CounselFin. II 

### LLCv 

### Bartnick, 214AD3d 1388, 1390 [4th Dept 2023]), or other "simple, readily verified fact, confirmed by documentary evidence in the record" 

### (Nimble Ventures, LLCv Graves, 192 AD3d 514, 516 [1st Dept 2021]). In contrast, summaryjudgment in lieu ofcomplaint is not available where a note "referred to other documents with regard to events ofdefault" 

### (Matterof Estate of Peck, 191 AD3d 537 [1st Dept 2021]). Evidence presented on a summaryjudgment motion are examined "inthe light most favorable to the non-moving party'' 

### (Schmidt v OneNew YorkPlaza Co. LLC, 153 AD3d 427, 428 [2017]). A triable issue ofmaterial fact precludes summary judgment under CPLR 3213 

### (seeMatterof Estate of Peck, 191 AD3d at 537). Under these standards, plaintiffs motion for summaryjudgment in lieu of complaint is denied. At the outset, the Notes are not instruments for the payment of money only that qualify for CPLR 3213, because "theyreferred to other documents with regard to events ofdefault" and therefore plaintiffs "right to payment could not be ascertained solely from the face of' the Notes 

### (Matterof Estate of Peck, 191 AD3d at 537). It is undisputed that the Notes have not matured ifnot accelerated by an event ofdefault (NYSCEF#s 4-6, § 1 [the maturity date the Notes is either the date that the Maxim Loans are fully satisfied or April 20, 2024]). Plaintiff nevertheless claims that payments under the Notes have been due and outstanding since October 2023 because defendant has allegedly "admit[ted] in writing its inability to pay, its debts" by virtue ofSimpson's email to Howard on September 28, 2023 (NYSCEF#s 4-6, § 3.1 [c]). To evaluate whether such an admission has occurred would require the court to look beyond the four corners ofnotjustthe Notes but also Simpson's email, in which the Notes were not explicitly mentioned, and Simpson did not expressly hold himselfout as defendant's representative (NYSCEF# 8 [Simpson's email signature only identified him as managingpartner ofArch]). Determining whether Simpson acted onbehalfofdefendant in the emailwould entail examination ofextrinsic evidence onArch's management roles in this real estate project. And assessing whether the Notes were within the scope ofthe email would require outside proofas to the ownership structure and financing arrangements ofthe Vandam entities. The extrinsic evidence needed for these determinations would far exceed in breadth and complexity the kind of"simple, readilyverified fact" that are only a "de minimis deviation from the face ofthe [debt] document" 

### (see Weissman, 88 NY2d at 444; cf. 

### Nimble Ventures, LLC, 192 AD3d at 516). Because plaintiffs claim for relief requires consideration ofoutside proof, the claim is not based on an instrumentfor

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6 of 7 the payment ofmoney onlywithin the meaning ofCPLR 3213 

### (seeMesaha Serv. & 

### Supply Co. vR. Freedman 

### & Son, Inc., 111 AD2d 985, 986 [3d Dept 1985] ["[s]ince proofbeyond the written instrument is necessary to substantiate the underlying obligation, resort to CPLR 3213 was inappropriate"]; 

### seealsoSpheyr, Inc. vMind Centers, Inc., 2022 WL 17553613 [Sup Ct, New York County 2022]). Plaintiffrelies on 

### Shearson LehmanHutton, Inc. vMyerson 

### &Kuhnto argue that the Notes qualify for CPLR 3213 treatment, even though they refer to outside documents for the definition ofdefault (197 AD2d 410 [1st Dept 1993]; NYSCEF# 12 at 7). This reliance is misplaced. In 

### Shearson, the default is "entirely monetary" and the reference beyond the four corners ofthe instrument is "merely repetitive of terms already contained within the instrument" 

### (Shearson LehmanHutton, Inc., 197 AD2d at 410). Whereas here, the alleged default is not a simple failure to pay but an email discussingthe financial difficulties faced by Arch, without directly referringto defendant. The email is not repetitive ofany terms already contained in the Notes and the email's meaning cannotbe precisely ascertained without more extrinsic evidence on the real estate project. Accordingly, plaintiffis not entitledto summaryjudgment under CPLR 3213. In any event, there exists a question offact as to whether defendant has defaulted on the Notes. The Notes define an event ofdefault to include a written admission by defendant as to defendant's debts, not other Vandam entities' debts (NYSCEF #s 4·6, § 3.1 [c]). However, the record is not clear on that. While plaintiff alleges that Simpson's email constituted a written admission ofdefendant's inability to pay its debt, the communication between Howard andArch before and after Simpson's email appears to suggest otherwise. Notably, Simpson's emailwas sent on the same day and under the same email thread thatArch forwarded the Maxim Default Notice to Howard (NYSCEF# 7). And even the Default Notices plaintiffissued in response to Simpson's email mentioned nothing other than the Maxim Default Notice and Simpson's email as evidence ofdefendant's default (NYSCEF#s 9·11). Viewingthese facts in the light most favorable to defendant and reading Simpson's email in these contexts, a reasonablejury may read the email as limited to the Maxim Loans only.3 As such, the record here at least raises a question offact as to whether Simpson's email was a written admission ofdefendant's inability to pay the Notes or not. This is a material issue offact that precludes summaryjudgment under CPLR 3213 

### (seeIan WoodnerFamily Collection, Inc. vAharisBooks, Ltd, 284 AD2d 163, 164 [1st Dept 2001] [material issues offact as to whether there was default precluded summaryjudgment in lieu ofcomplaint on a promissory note]). Accordingly, plaintiffs motion for summaryjudgment in lieu ofcomplaint is denied.

3 Further, Simpson's email mentioned that he "took [Howard] up on [Howard's] offer to send cash to move this project along, that wentbackwards" (NYSCEF # 8 at 1). Consideringthat Howard was defendant's co-investor in this project, and he previously provided emergencybridge funding to the project, itis possible that Simpson's email was more ofa request for additional funding from Howard than an admission ofdefendant's inability to pay the Notes.

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### CONCLUSION Based on the foregoing, it is ORDERED that the motion for summaryjudgment in lieu ofcomplaint made by plaintiffElisa Wietschner, as trustee ofthe WFIG Trust, is denied; and it is further ORDERED that this proceeding is converted into a plenary action and parties' moving and answeringpapers shallbe deemed the complaint and answer respectively.

04/05/2024 DATE
CHECK ONE:

APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED 

# 0 DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN

655573/2023 WIETSCHNER, ELISA vs. 9 VANDAM JV LLC Motion No. 001 MARGARET A. CHAN, J.S.C.
NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT**□** OTHER**□** REFERENCE

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